Dow Chemical Profit Rises on Sales of Caustic Soda, Seeds

Net income increased to $900 million, or 69 cents a share,
from $597 million, or 45 cents, a year earlier, Midland,
Michigan-based Dow said today in a statement. Earnings excluding
a one-time gain at a plastics venture were 62 cents a share,
trailing the 63-cent average of 16 estimates compiled by
Bloomberg, the first earnings miss in five quarters. Revenue
climbed 17 percent to $15.1 billion from $12.9 billion.

Chief Executive Officer Andrew Liveris is expanding in
Saudi Arabia and on the U.S. Gulf Coast to turn oil and low-cost
natural gas into chemicals used in food packaging and auto
parts. The unit that makes caustic soda surged 71 percent on
higher prices. The agricultural sciences unit was boosted by
demand from Latin America.

“Five of the six businesses had a great quarter,” Paul Leming, a New York-based analyst at Ticonderoga Securities who
rates the shares “buy,” said today in a phone interview. The
plastics unit disappointed, he said.

The plastics business remained Dow’s most profitable in the
quarter even as earnings dropped 17 percent to $748 million
because of higher ethylene production costs and lower demand in
developed markets.

Dow shares fell 38 percent in the third quarter, a sign
that investors expected earnings to plummet, Hassan Ahmed, a New
York-based analyst at Alembic Global Advisors who rates Dow
“buy,” said today in a phone interview. “The market was
expecting a blood bath which we really didn’t see,” Ahmed said.

‘Bright Spots’

“Headwinds in developed regions continue to restrain
consumer spending and business investment,” Liveris said in the
statement. “However, in emerging regions, growth in the middle
class continues to drive demand, particularly as it pertains to
infrastructure and urbanization.”

“And we continue to see bright spots in recession-
resistant sectors such as agriculture, food packaging, energy
and water,” he said.

The agricultural unit posted earnings before interest, tax,
depreciation and amortization of $75 million, compared with a
year-earlier loss of $12 million. Sales volumes rose 18 percent
and average prices gained 9 percent, driven by herbicides and
corn seeds. Dow said it grabbed nearly 20 percent of the U.S.
cotton seed market in 2011, adding 10 percentage points in two
years.

Profit in the feedstocks and energy division surged to $263
million from $154 million as average prices jumped 36 percent,
aided by caustic-soda demand from makers of alumina and pulp and
paper, the company said.

Dow and Saudi Arabian Oil Co. said in July they will
proceed with a $20 billion plan to build factories that make
petrochemicals from low-cost oil and gas derivatives at the
Saudi port of Jubail. Dow plans to expand production of plastics
ingredients ethylene and propylene in Texas and Louisiana,
including construction of its first U.S. cracker, as ethylene
plants are called, since 1995.

Dow, founded in 1897 as a bleach maker, is the world’s
biggest producer of chlorine, epoxy resins and polyethylene
plastic. It’s the world’s second-biggest chemical maker by
revenue behind Germany’s BASF SE.